SEC Chair Gensler: Cryptocurrency Rules Are Clear Enough, Enforcement Actions Ready When Needed

U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler firmly responded to criticisms on Monday during the Financial Markets Conference (FMC) 2023 hosted by the Federal Reserve Bank of Atlanta, claiming that the agency has already published rules providing useful guidance for cryptocurrency companies wishing to comply with federal laws.

Is the SEC Lagging Behind in Cryptocurrency Legislation?

During a speech, Gensler barely mentioned the crypto market, but the host, Tom Barkin, asked about the SEC's lawsuit against Coinbase and whether he believed the SEC was lagging behind other countries in enforcing regulations in the crypto industry.

Gensler stated that he doesn't believe the SEC is lagging behind, citing the 140 cases the SEC has brought over the years as a reminder that crypto companies are building fraudulent business models.

Gensler pointed out that crypto companies often operate by mixing customer funds:

Gensler: SEC Can Help You Comply If Needed

Due to a lack of clear and innovative regulations, the SEC has faced criticism from the crypto industry in recent years. However, when asked about the long-term need for clearer regulations in the crypto industry, Gensler insisted, "The rules are already out there." He mentioned that the SEC has rules in place for custody of assets, becoming exchanges, broker-dealers, or advisors, and how to register securities and issue them on the SEC.

Gensler further explained, "If people are putting money in and expecting a return based on the efforts of others, that fits within the definition of a security in most cases."

There are typically financial intermediaries and nodes in the crypto network, and if they have securities on their platform, they need to comply.

Gensler even added:

If these things seem too hard for the crypto industry, the SEC is "ready to help them comply."

SEC Counters Coinbase: Prefers "Enforcement Actions" over Rulemaking

Meanwhile, regarding the ongoing lawsuit between the SEC and Coinbase, the SEC responded this morning to Coinbase's April petition requesting the court to direct the SEC to clarify its regulatory stance and provide clear guidance for crypto exchanges and companies.

The SEC's response stated that Coinbase has no authority to demand that government agencies perform specific duties. The SEC mentioned that only a few months have passed since Coinbase submitted the petition and supplemental materials, and rulemaking takes years. According to Coinbase's Chief Legal Officer, Paul Grewal, SEC indicated in court that they lean towards enforcement actions over rulemaking.

It's worth noting that the SEC clarified that Chairman Gensler's public statements are not official guidance or policy statements from the SEC, and the public should not rely on his words.

Paul expressed concerns about the SEC's response:

We (the crypto industry) are unsure when the SEC will consider which matters fall within its jurisdiction and which do not, but they are likely to keep changing their minds.